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the controls over employees. They may call it “cost control” or “reorganization,” or some such. But whatever name it goes by, it’s a fact of life when a company hits a rough patch: Tighten the screws, take away perks—such as free food—scrub all the expense reports a third time. And quite often it works—or at least it seems to. Recall Alfred with his gloves, a form of financial control no doubt thought up by an accountant looking to save a few francs a year in the budget by preventing Gordon Forward’s “3 percent” from taking an extra pair home. On the face of it, the policy was a success: Spending on gloves went down. But, of course, all the ancillary costs in lost productivity, bureaucracy, and paperwork—not to mention the salary of the supply closet “doorman”—are never accounted for on that budget line. And that’s to say nothing of the order that might go out late or the products not made, on the margins, because of these various “operating efficiencies” that, like barnacles on a boat, make the whole company a little less—our liberating leaders would say, much less—swift.

THE ILLUSION OF CONTROL

Jacques Raiman of GSI understood this phenomenon all too well. In fact, Raiman eventually came around to the radical view that all financial controls were little more than creative fictions. Two stories illustrate the point.

The first takes place in the early days of GSI, in 1979. GSI is growing quickly while, at the same time, Raiman is trying to instill a new, freer culture in the company. They had grown to one thousand people, and Raiman had started to hold regular seminars with employees in small groups so that he could explain GSI’s new, informal “rules of the game”—and give people a chance to voice what sorts of problems they might be having.

“[Earlier] I had implemented a financial reporting system,” Raiman recalled. “And the finance department was, in fact, the police, the internal KGB.” It was, in other words, management’s tool for keeping an eye on all corners of the company and enforcing budgets and spending policies. Or so they thought. During one of these seminars, the head of operations in Grenoble, France, spoke up.

“Well, Raiman, I’ll tell you how it really works,” he said, according to Jacques. “We establish our budget, fine. If one month we are above budget we’re congratulated, but if another we are under the budget the sky falls: investigations, inquiries, discussions. So, it’s not complicated: When we are above budget we cheat and instead of reporting the sales, we keep them for the next month. That’s for me and the executive team, but the salesmen cheat the same way. You believe, Raiman, that you know [thanks to all the reporting] the reality, but you know nothing.”5 After the corporate scandals in the United States in 2002 and 2003, there was a huge and expensive attempt to crack down on precisely this kind of manipulation of financial reports. One result of this was a requirement that a company’s top executives sign a sworn statement attesting to the truth and accuracy of their financial reports. Anyone who signs such a document should be aware that Raiman’s story is not unique, and neither the passage of time nor of voluminous new laws has changed the fact that the real experts on your company’s various budgets are the ones near the frontlines who manipulate them to make their numbers and beat the system whenever possible.

Even so, this is one of those truths not often spoken in polite company, never mind in the presence of the company chairman. Raiman said that the executive’s candor was the result of his efforts, up to that point, to foster openness and frank communication. Raiman continued, “So, while on the train on our way back to Paris, we decided that we would not function like that anymore. Management [financial] control is here to help managers understand the numbers, not to be ‘Moscow’s eye.’ If a business unit head has some performance problems he’ll talk directly with the division head.” In other words, business units would still report numbers to the center, but the “KGB” would be dismantled.